Burn Multiple Formula 2026 Net Burn / Net New ARR
Reference page for the burn multiple formula. The numerator, the denominator, the Sacks 2022 origin, the 2026 stage benchmarks, and a working calculator with a worked numerical example. The single most cited capital-efficiency metric in 2026 SaaS.
The formula
Net Burn
Total cash out minus total cash in. Cash basis. Includes salaries, rent, cloud, software, marketing, sales commissions, services. Use the same period as the denominator.
Net New ARR
New ARR + Expansion ARR - Churned ARR - Contraction ARR. The change in annual recurring revenue. Detailed on /net-new-arr-formula.
Numerator: Net Burn
Denominator: Net New ARR
Worked example
A Series A SaaS reports the following for Q1:
| Total cash expenses (Q1) | $3,000,000 |
| Total cash revenue (Q1) | $1,000,000 |
| Net Burn (Q1) | $2,000,000 |
| New ARR signed (Q1) | $1,500,000 |
| Expansion ARR | $300,000 |
| Churned ARR | -$400,000 |
| Contraction ARR | -$100,000 |
| Net New ARR (Q1) | $1,300,000 |
| Burn Multiple | 1.54x |
$2.0M burn / $1.3M net new ARR = 1.54x. At Series A in 2026 that is at the edge of efficient (under 1.5x is the standard expectation per Bessemer and Sacks scales). Acceptable, but the board will want to see the path to sub-1.0x as ARR scales.
2026 stage benchmarks
| Stage | Burn Multiple (median range) | Bessemer Score | Read |
|---|---|---|---|
| Seed | 1.5 - 3.0x | 0.33 - 0.67 | Acceptable; learning phase |
| Series A | 1.0 - 2.0x | 0.5 - 1.0 | Sub-1.5x preferred |
| Series B | 0.8 - 1.5x | 0.67 - 1.25 | Sub-1.0x competitive |
| Series C | 0.5 - 1.2x | 0.83 - 2.0 | Sub-0.8x healthy |
| Growth / Pre-IPO | 0.3 - 1.0x | 1.0 - 3.3 | Approaching FCF positive |
Source: Bessemer State of the Cloud 2026, KeyBanc Capital Markets SaaS Survey 2025-2026, OpenView SaaS Benchmarks 2026. Tightening versus the 2022 era when 2x was considered acceptable across stages.
The Sacks 2022 origin
David Sacks (Craft Ventures, ex-PayPal, ex-Yammer) published the burn multiple framework on his Substack in early 2022. The post argued that the prior era's growth-at-all-costs investing had obscured how much cash companies were burning per dollar of growth. A company burning $3 for every $1 of new ARR could look impressive if the growth rate was high enough; Sacks argued that the underlying unit economics were broken.
The original Sacks scale (sub-1x great, 1-1.5x good, 1.5-2x suspect, 2-3x bad, 3+ horrible) has tightened. By 2026, sub-1.5x is the Series A floor and sub-1.0x is what gets you a competitive Series B. The market-wide reset in venture funding from 2022-2024 made efficiency non-optional. Bessemer formalised the inverse formulation as Efficiency Score and incorporated it into the annual State of the Cloud report.